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  • Nicoletta Fagiolo

The CFA Franc:  Africa’s financial anachronism

More and more voices on the African continent, from expert economists, businessmen to politicians and simple citizens are questioning the CFA franc system that rules the monetary regime in francophone West Africa.

Paris-based Pan-African groups[i] are organizing a protest to be held on the 31 October 2015, at Chamalières, France in front of the building where the CFA franc, a visible relic of the country’s previous colonialism, is still printed to this day. Chamalières, a small town in central France, is the location where the country’s central bank Banque de France founded its printing works in 1923.

Most independent states have their own national currencies. Worldwide, only four groups of countries issue a common currency and conduct a joint monetary policy. The four monetary unions — characterized by a common central bank which issues a regional currency — are the euro zone, the Eastern Caribbean Currency Union (ECCU) and two African monetary unions: the West African Monetary Union (also known by its French acronym, L’Union monétaire ouest-africaine (UMOA[ii] and the Central African Economic and Monetary Community (Communauté Économique et Monétaire des Etats de l'Afrique Centrale, CEMAC).[iii]

The two African monetary unions, also known as the franc zone, are made up of France and 14 African states[iv]: eight of them make up UEMOA: Benin, Burkina-Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo; six others make up the CEMAC: Cameroon, Central Africa, Congo, Gabon, Equatorial Guinea and Chad. The franc area also includes the Comoros.[v]

The anomaly in the two African monetary unions UEMOA and CEMAC is that final fiscal and monetary decision making on the issuing of a currency used by 150 million people in 14 different countries is endorsed each year by a foreign parliament. Specifically, the French National Assembly and Senate.

A colonial heritage

By the late 1890s France formally established French West Africa, comprised of: Côte d’Ivoire, French Guinea, Niger, Burkina Faso, Senegal, Mali, and Benin (then Dahomey). In 1905 Mauritania had become a French Protectorate, but by 1920 it joined French West Africa as a colony.

Before territorial currencies were born in the 19th century, monetary systems were organized quite differently. Foreign currencies circulated side by side with domestically produced currencies. “Just before the American civil war as many as 10,000 different types of paper notes circulated in that country and merchants were forced to consult frequent newsletters that detailed the exchange rates between them”, writes Professor of International Political Economy Eric Helleiner in his book The Making of National Money Territorial Currencies in Historical Perspective. “In China, a heterogeneous monetary order lasted till the 1930s”, to name but a few historical examples.

Before the introduction of the French franc as the accepted legal tender, local currencies in French Polynesia, then Oceania, (such as shells, feathers, animal teeth) and in New Caledonia (such as dyed fiber skirts, fox hair, jade pearl necklaces, yams, axes) were used side by side with the French franc, the dollar and the Chilean and Peruvian piastre.[vi]

The history of money also maps the relationship between political and monetary systems. During colonialism the monetary system functioned within the framework of an empire. During the French colonial empire, a single currency was circulated on the entire territory it controlled on a fixed parity basis. Colonial authorities also created new low-denomination money that was integrated with the new official system and they made concerted efforts to remove from circulation those forms of money, such as foreign currencies and pre-colonial local currencies, that did not conform to the new homogeneous monetary order,” wrote Professor Helleiner. [vii]

Resistance to colonial currencies was not uncommon: “for about four decades following military defeat — a condition starting with occupation in 1897 and routinized around 1903 with incorporation into French West Africa — the population of the west Volta (now in Burkina Faso) successfully flouted the colonial policy of replacing the local money (the cowry) with the franc,[viii] writes Mahir Saul in Money in Colonial Transition: Cowries and Francs in West Africa in American Anthropologist. A French imperial decree in January 1907 eventually prohibited local treasuries from accepting cowries to enforce the transition to colonial coins.

Historically, and as part of the French colonial empire, all French colonies in Sub-Saharan Africa were part of the broad franc zone. The broad franc zone at some point in time included countries from various parts of the world with various forms of French currency used in the French colonial empire at one time or another one including: franc CFP (Franc des Colonies Françaises du Pacifique) in French pacific colonies (French Polynesia, New Caledonia, Wallis and Futuna islands), franc CFA (Franc des Colonies Françaises d’ Afrique) for French African colonies; franc Comorien (Franc of the Comoros colony); franc Marocain for Morocco, franc Tunisien for Tunisia, franc Algerien for Algeria and the franc and other forms of France controlled currency in Indochina (Cambodian franc, and “piastre” in Vietnam and Laos).

With their accession to independence, and like in the British colonial empire where many countries dropped the sterling zone and centralization of foreign reserves in London, many countries abandoned the broad franc zone arrangement with their accession to independence: Algeria (1963), Morocco (1959), Tunisia (1958), Mauritania (1973), Madagascar (1972), Guinea Conakry (1958), Indochina (1954), Mali (1962, but reintegrated in 1984).

Originally established in 1939, just before World War II, the CFA franc was first printed on December 26, 1945, when France ratified the Bretton Woods agreements and made its first statement parity to the International Monetary Fund (IMF). CFA initially stood for "Franc of the French colonies in Africa" and the French monetary agency, the Central Cashier of France for Overseas Territories, was responsible for issuing currency in the French colonies between 1941 and 1959.

Today's franc zone is an extension of the monetary authority that governed these former French colonies prior to independence. In the late l950s, the two currency unions were set up, and the newly independent Francophone countries of Africa were given the option of joining. All but Guinea, Madagascar and Mauritania joined the franc zone.

Through the agreement to join the French community, two regional central banks were created in 1962 which dealt with the CFA franc: the Central Bank of West African States (Banque Centrale des États de l' Afrique de l'Ouest, BCEAO) and the Bank of Central Africa and Cameroon (Banque Centrale des Etats de l’ Afrique Centrale, BCEAC) — both were controlled by the Minister of Finance.

Rules set up at the time to govern the monetary system are still intact today: governments borrowing from the central bank could not exceed 20% of the previous year’s tax receipts; at the time 100% of foreign reserves were centralized in the French treasury; the exchange rate was fixed at 50 CFA to 1 French franc and has remained constant undergoing only two devaluations in 70 years, thus making nominal devaluation impossible as a monetary policy choice for economic governance.

However from the end of World War II until the adoption of the euro, France devalued its own franc 14 times in order to bolster competiveness and exports, with the CFA franc devalued along with it each time. “For the CFA countries lacking well-developed industrial production and intra-community trade, devaluation brought them higher import prices, inflation, and rising unemployment” says Sanou Mbaye, Senegalese economist and former senior official at the African Development Bank.

Institutional dependency

France continues to exert influence on the definition of monetary policy in the countries concerned, notably through its representation in the boards of the respective regional central banks, which has veto power over key decision-making. France can also exert peer pressure at the annual meetings of the finance ministers.

Monetary cooperation today between France and African countries in the franc zone is governed by four fundamental principles: the holding of the countries foreign reserves, a convertibility guarantee by the French, a fixed peg to the euro and an unlimited transfer.

Seventy years after its creation the franc zone has not increased trade within the region nor with France. Interregional trade is extremely low around 20% when compared to the European Union, which stands at 60%. Furthermore today 80% of France’s exports in Sub Saharan Africa are directed outside the Franc zone countries (such as Nigeria, Angola and South Africa) and 20% only with the franc zone, thus the monetary regime no longer accompanies actual trading patterns[ix].

Another anomaly is that monetary and “real” economic policy decision making are split into two different organizations: in the case of the West African Union the 1962 UMOA treaty governs common monetary policies and the 1994 UEMOA treaty governs the common economic policy goals.

In 2010 the BECEAO, the region’s central bank, updated the 1962 UMOA treaty, which stipulates the bank’s independence from all member countries. The region’s monetary policies prior to this treaty where outlined by the Council of Ministers, now they are outlined through the newly established West African States Central Bank (BCEAO) Monetary Policy Committee. It has placed price stability as its only objective; furthermore it states that the bank cannot come to the help of member countries facing need.

Within the BECEAO’s Monetary Policy Committee a French representative sits with decision-making powers. However, the UEMOA representatives from the eight member countries in the region only sit in an “observer capacity”, economist Kako Nubukpo, former Head of Economic Analysis and Research Division at UEMOA. [x] This decision-making architecture dangerously separates the real economy from monetary policy choices, thus not necessarily reflecting the regions needs.

The holding of the countries foreign reserves

To this day members' foreign-exchange reserves are pooled; each central bank keeps 50% of its foreign reserves with the French treasury. The ratio was 100% until 1973 and 65% until the 2005 agreement lowered it to 65%. An extra 20% is kept to cover financial liabilities. In recent years, these accounts held by the French treasury have been in surplus despite the dire need for liquidity on the continent to spur economic development.

This has fostered a liquidity crunch in the franc zone and a lack of investment opportunities as reserves are hoarded at the French treasury. Furthermore, the unlimited transfer has also facilitated capital flight and illicit transfers.

Even though the BEAC and the BECEAO have an overdraft facility with the French treasury, the drawdowns on those overdraft facilities are subject to the consent of the French treasury. The final say is that of the French treasury, which has invested the foreign reserves of the African countries in its own name on the Paris Bourse.

In reality the regions’ African economies keep to this day up to 100% (98% for CEMAC countries and 90% for UEMOA) in the French treasury.

Furthermore, growth is not accounted for in the regional central banks objectives. To ensure monetary discipline, foreign reserves must equal at least 20% of the central banks' short-term deposits. The fact that the CFA central banks impose this cap on credit -20% of that country’s public revenue in the preceding year-is a further limitation on liquidity availability. The tight lending constraints imposed on government and private sector borrowings is also reflected in the ratio: credit accorded to businesses represents 300% of gross domestic product (GDP) in the United States, 150% of GDP in South Africa and 95% in France whereas its as low as 23% of GDP in the franc zone (sometimes falling under 20%). This is an indicator of very little liquidity circulating and difficult access to credit in francophone West Africa when compared to other areas.

A recent 2014 Bloomberg Business news release reads: “A hoard of cash sits in the Bank of France: $20 billion in African money held in trust by the French government and earning just 0.75% interest. Now economists and politicians from 14 Central and West African countries say they want their funds returned and an arrangement dating back to the days of France’s colonial empire ended.”

The CFA franc zone is organized to restrict credit expansion to net export revenue by suppressing the mechanism that would ‘expand’ credit endogenously through either credit advanced against assets, in particular financial assets, or fiscal stimulus.

Economist Jan Podorowski asks the critical question if modifications in the operating mechanism of the Franc zone, allowing for greater credit flexibility, could support economic development in a more effective way[xi].

Unlimited convertibility guarantee by the French

France states in the monetary agreements, that in exchange for holding 50% of the respective countries’ foreign reserves, it guarantees the CFA Franc convertibility, where by the two CFA Franc currencies are fully convertible to the euro or any other currency.

Because the French treasury is itself subject to EU Maastricht stability pact as well as the most recent EU budget stability pact signed on March 1, 2012 by all 27 EU countries except UK and Czech Republic restricting budget deficit of the French Treasury, the presumed unlimited access to foreign exchange is clearly a ridiculous myth, Salomon Samen[xii], economist and World Bank Institute Trade Group member said.

In addition, in recent three decades with successive and repetitive balance of payment crisis in many African countries, recourse to resources of the international community (IMF, WB) was the standard practice and has played the central role in meeting expected financing resources required. France has not acted as the lender of last resort role in this monetary arrangement.

Furthermore the European Central Bank (ECB) or the European System of Central Banks are not obliged to support the convertibility and/or parity of the CFA (or Comorian franc.) Yet African countries are now compelled to apply macro-economic policies similar to those applied in the euro area.

Interregional trade is also limited as within the two sub zones the CFA franc of each sub-zone is convertible with the euro but not directly with each other’s. The CFA franc here acts as a bias against African economic integration.

A fixed peg to the euro

In todays’ world, there is continuum flexibility between the free float and the rigid peg. Depending on the typology used, there are between eight and 15 different types of exchange rate regimes based on the IMF official rankings. The CFA franc, which has maintained a fixed parity with the French Franc since independence, is one of the longest experiences with a fixed exchange rate of any group of developing countries. Some authors argue that the CFA franc zone member countries have lower economic growth due to the rigidity of their exchange rate regime, which is linked to the Euro zone economy and its focus on low inflation and stability, rather than the more immediate needs of an African economy.

“A strong currency acts in the economy as a tax on exportations and a subvention on imports: this factor has reduced the capacity in capturing world markets for primary resources exports”, explains Nubukpo at a recent conference held on 17 September 2015 on the CFA franc zone at the French senate. The dramatic failure of the cotton industry in West Africa is one example of a market that could not compete with lower prices from Asia. “The CFA Franc has not been at the service of growth and development, our economies by only exporting primary resources, also export possible jobs which could be created on the continent”, Nubukpo underlines. [xiii]

Harvard economist Dani Rodrik comparing Asian growth to African growth writes: “On line In Asia, growth is typically engineered by increasing the profitability in manufacturing and other tradables. But in Africa the typical growth spurt is preceded by aid inflows and other transfers, which appreciate the exchange rate, and render future growth less sustainable. This is the so-called Dutch disease.” [xiv]

European control

African countries are now compelled to apply macro-economic policies similar to those applied in the euro area whose focus is on inflation control and stabilization, rather than economic growth and employment.

With France’s membership to the euro zone on 1 January 1999, the parity remained the same, adjusted automatically, making one euro worth 6.55957 FF francs – equivalent to 655.957 FCFA.

Before the replacement of the franc by the euro, the change in parity with the CFA franc was the outcome of consensus among all signatory countries to the exchange rate agreements between France and its African counterparts. Since the replacement of the French franc by the euro, France may negotiate and conclude modifications to the agreements. However, the Commission, the European Central Bank and the European Economic and Financial Committee must be informed in advance of any such changes.

Towards an African currency

Seemingly, those who have tried to move away from the CFA franc framework have been severely punished by their former colonizer France. Guinea’s former president Sékou Touré refused to join the Union in 1958, as did the Republic of Togo’ first president Sylvanus Olympio, who on 13 January 1963 was assassinated just three days after he started printing his country own currency. More recently in April 2011, Ivory Coast president Laurent Gbagbo, who had been pushing for a sub-regional monetary unification, was fiercely toppled by a French-UN coup d’état.[xv]

Proposals are being developed for several regional African monetary union projects[xvi] as well as one spurred by the African Union which intends to create a African Central Bank in Nigeria and an African Monetary Fund in Cameroon as part of the creation of a common currency for the whole continent by 2021.

Money’s functions are not just economic, but also political (an instrument of power), social (facilitating various social relationships) and cultural (transmitting or reflecting cultural values). Mbaye, speaks of an urgent need to decolonize the franc zone: “France has always drawn on its African reserves, especially during economic downturns. It did so in the 1930’s, when the franc zone helped France to survive the Great Depression, and again during World War II, when the zone bankrolled General Charles de Gaulle’s resistance to the German occupation. Another devaluation of the CFA franc today might deflate France’s debts to the franc zone and boost its African-based export industries, but it would worsen the franc-zone countries’ miseries”[xvii]. The scope of the demonstration to be held on the 31 of October 2015 is focused on unmasking these faulty mechanisms of the CFA franc.

[i] . The movement is being spearhead by a clutch of four organizations — Unité Dignité Courage (Unity, Dignity Courage, UDC), Mouvement pour la Souveraineté Economique et Monétaire d'Afrique (Movement for the Economic and Monetary Sovereignty of Africa, MOSEMA), Femmes en résistance (Women in Resistance) and Jeunesse Consciente Kongolaise (Conscious Congolese Youth, JCK). However, this first-time-ever demonstration to be held in this historically symbolic spot their rallying cry is also supported by numerous civil and human rights organizations, while garnering many individual sympathizers.

[ii] The UMOA Treaty of 1962 defines the common monetary policies of the region whereas UEMOA (aka WAEMU or WEMOA) established in 1994, to distinguish itself as a purely economic (hence the added “E”) institution, is responsible for establishing a customs union, regional economic policy decisions, etc. The monetary policies of the region are however still governed by an updated 2010 agreement of the 1962 UMOA accords.

[iii] La CEMAC includes the Union monétaire de l’Afrique centrale (UMAC) et Union économique de l'Afrique centrale (UEAC).

[iv] All but two are former French colonies: Bissau Guinea that joined in 1997 a former Portuguese colony and Equatorial Guinea, a former Spanish colony, that joined in 1985.

[v] In addition to France, UEMOA and CEMAC, the “franc zone” also includes the Comoros. In 1979, the government of the Comoros signed a monetary cooperation agreement with France, making the Comoros part of the franc zone but not part of the CFA franc zone. The exchange rate of the Comorian franc to the French franc (now euro) has also since 1994 differed from that for the CFA franc. The broad Franc Zone today comprises 16 African countries including Comoros, and the French colonies in the Pacific, in separate monetary arrangements with France.

[vi] L’Histoire du Franc Pacifique, Institute d’emission d outre-mer, 2014.

[vii] Eric Hellner, op. cit. p 163

[viii] Mahir Saul, Money in Colonial Transition: Cowries and Francs in West Africa in American Anthropologist, March 2004.

[ix] Kako Nubukpo, la « Politique monétaire, fixité du change et financement de l'émergence en zone Franc : le cas de l'UEMOA » lors du colloque sur l'avenir de Franc CFA, organisé par les fondations Gabriel Péri et Rosa Luxemburg (Allemagne), Paris, 17 Septembre 2015 at

[x] Kako Nubukpo, op. cit.

[xi] Jan Podorowski, The Franc Zone in Handbook of Critical Issues in Finance, edited by Jan Podorowski and Jo Michel, Cheltenham UK, Edward Elgar Publishers, 2012. p. 137-38

[xii], Rethinking the CFA Franc Zone arrangement, 1 April 2012, camnews24 at

[xiii] Kako Nubukpo, op.cit.

[xiv] Dani Rodrik, Asian growth versus African growth, July 19, 2007 at

[xv] Nicoletta Fagiolo, Laurent Gbagbo and the right to difference in RESET, 30 June 2013 at

[xvi] These monetary unions include: the AMU (Arab Maghreb Union) in North Africa, COMESA (Common Market for Eastern and Southern Africa) in East and South Africa, ECCAS (Economic Community of Central African States) in Central Africa, SADC (Southern African Development Community) in South Africa, WAMZ (West African Monetary Zone) in West Africa and a monetary union spearheaded by ECOWAS (Economic Community of West African States).

[xvii] Sanou Mbaye, Decolonizing the franc zone at

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